Potential Risks to E-filing
In an increasingly digital world, fears about security and privacy are inevitable. In recent years, the IRS has stepped up its efforts to combat identity theft with improved screening processes.
More than 3,000 dedicated professionals handle identity theft issues each year on behalf of the IRS to keep e-filing a secure and preferred alternative to paper filing.
Still, that doesn’t mean you’re free from taking precautions to ensure your data is safe.
Security Starts with You
Before selecting an IRS-authorized e-file provider, you’ll need to keep your data confidential and strengthen the security of your own system.
- Take inventory of where you store sensitive data. Whenever possible, maintain high-risk data on the fewest number of computers or servers, along with separating it from the rest of your business data.
- Encrypt sensitive electronic data via special software or security programs. If you’re going to permanently store sensitive records on these computers or servers, consider how they’re stored and what networks have access to them. Consider exploring electronic “wiping” programs that permanently discard files deleted from your hard drive, as well as the remote wiping of phones in case of a security threat.
- Make sure you have a strong firewall. A fully protected network begins with a properly configured firewall, which acts as a first line of defense with Internet traffic coming in and out of your business.
- Keep reliable antivirus and anti-malware programs up to date. Using these programs is smart but unless you’re staying on top of the latest versions or updates, you could open the door to newly emerging threats.
- Reinforce your password policy. Set complex and obscure passwords when using software and even your own devices. Strong passwords should be at least eight characters and consist of a combination of letters, numbers and special characters.
- Ensure only trusted individuals have access. Don’t share access to your records with others unless they absolutely need it.
Why E-Filing in the Cloud is the Safest and Easiest Method
The most reliable method of e-filing is to use an e-file provider with secure, cloud-based storage. One key reason is that it eliminates the need for staff training. Traditional e-filing providers often require clients to download and install their software. This then requires periodic updates. You must also train new staff on the software to make sure they are using it correctly.
The new breed of e-file providers, however, uses the cloud to store client data and generate W-2 and 1099 forms. Here, your company does not have to download and learn any software. All the forms you need are online in east to follow, fill-in form. There is no staff training time because the forms are self-explanatory even for first-time users. And as long as you pick the right e-filing provider, your sensitive data will be much more secure.
How an E-Filing Provider Becomes IRS-Approved
As with everything related to the IRS, the process an e-file provider goes through to become IRS-authorized is fairly intensive. Only IRS-authorized e-file providers can use the official IRS logo, which reads "Authorized Provider IRS E-File."
Obtaining this exclusive logo requires completing three steps:
- Create a provider account with the IRS
- All staff associated with tax matters must also sign up for IRS e-services. The IRS then sends out a confirmation code by mail to the principle contact. This code must be confirmed within 28 days of the send date.
- Fill out the IRS application
- Typically it takes a minimum of 45 days for a provider to become approved. In addition to filling out information about the business itself and every key individual in the business, the provider applicant must submit fingerprints of each key individual. Fingerprints must be obtained by a professional (such as a police officer) and must be submitted via a special IRS card used only for fingerprints.
- Pass all of the IRS's "suitability checks"
- Once the application has been completed and all of the required information has been submitted, the IRS now conducts its own series of suitability checks. These checks can include (but are not limited to) credit and background checks, tax compliance/non-compliance checks and criminal history checks. Only if the applicant passes all of these checks will the IRS generate an acceptance letter. This letter will include the applicant's EFIN (electronic filing identification number).
Selecting an e-file provider is easier and safer when you focus only on those providers that have obtained the IRS's authorization to provide e-filing services.
Choosing an E-File Provider
Yes, there are many e-file providers that would love to have your business. But did you know that only a handful of these use printers the IRS has vetted and authorized to print official tax forms?
The truth is, the e-filing field regulates itself, which means it’s up to you to select a trustworthy and secure provider.
You need to look for all of the following in your e-file provider:
- An IRS-authorized printer for printing tax forms and official tax documents
- Government-recommended encryption programs to keep your sensitive data secure
- End-to-end encryption for all your data (this means as soon as you enter data into an online form with your e-file provider, it’s already encrypted, and it stays encrypted throughout the filing, printing and mailing process)
- SOC certified with the American Institute of Certified Public Accountants (AICPA)
- Never releases or sells your information to any third party during or after you’ve received services (unless the law specifically requires it)
- A secure facility from which to print out and mail all the necessary forms
Finding a provider with SOC certification means you’re on the right track, but be aware the burden is on you to find an e-file provider that keeps your company and credit card information secure and encrypted from start to finish.
Is E-Filing the Future of Tax Reporting?
As long as you select an e-file provider that offers top- notch, government-grade, end-to-end data encryption and security, e-filing will save you time and money. It’s never too early to finalize your filing plan for next year's tax reporting, and the earlier you start, the easier the overall process will be.